Should You Ditch Your Gas Guzzler for a Smaller Car?
You've seen the headlines: SUVs and trucks collecting dust on dealer lots; sales of small cars hitting the big time. Even if gas prices aren't as bad as they seem, there's something about feeling the pain on a weekly basis that's causing panic -- and a consequent surge in trading down to more sensible cars.
But if there's a guzzler in your driveway now, is swapping rides financially wise? Based on a specific example we set up, the answer could very well be Yes. Let's say you own the hottest SUV of five years ago, a 2003 Ford Explorer. If you drive 12,000 miles annually and gas stays at $4, feeding this 16 MPG Ford for five more years would ring up a whopping $15,000 bill. Let's suppose it also racks up $1,000 in repairs (hey, it's old), and that in the end, you sell it for its eventual bluebook value of $5,200. That brings its total five-year cost to $10,800.
Now let's see what happens if you instead upgrade to a brand new Ford Focus. Your first move: dumping your old Explorer for its present-day value of $9,300. Then you go out and buy the Focus for $16,000 -- partly using the $9,300 cash you just got, then financing the remaining $6,700 at 7% over 3 years, which amounts to $747 in interest. This fuel bill for this miserly 28 MPG Focus would come to a modest $8,571 over five years, after which you'd sell it for $6,700. All in all, the total five-year cost comes to $9,318.
Option A: Keep Explorer (Expenses)
Gas ($15,000) Repairs ($1,000) Resell Price (-$5,200)Total ($10,800)
Option B: Buy New Focus (Expenses)
Explorer Sale (-$9,300) Purchase ($16,000) Interest ($747) Gas ($8,571) Resell Price (-$6,700) Total ($9,318)Admittedly, many of these numbers were derived from estimates and assumptions. Changing even one variable can make a profound difference, i.e. financing the entire purchase price of the Focus (over four years) would jack up interest payments from $747 to $2,390.
Still, our scenario sure illustrates how the cost of fuel can now account for a lion's share of expenses -- enough, in this case, to turn the tide in the Focus's favor. Even if the numbers were in a dead heat, ask yourself: would you rather sentence yourself to a slow-witted truck on its last legs, or drive off in a shiny new set of wheels backed by a full warranty?
About the Author: I'm a writer for vLane.com, so I write a lot about cars and other vehicles. You can see the original source for this blog and my other stories at http://vlane.com/blogs_article/80/ditch-your-guzzler-for-compact-car
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